9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (11) TMI 720 - AT - Income TaxDisallowance u/s 40(a)(ia) Tax withholding obligations u/s 194C and 194J discharged or not - Lab testing charges and printing the stationery expenses Held that - Following the decision in Rajeev Kumar Agarwal Versus Additional Commissioner of Income Tax 2014 (6) TMI 79 - ITAT AGRA - the second proviso is declaratory and curative in nature and has retrospective effect from 1.4.2005 - a penalty for tax withholding lapse but it is a sort of compensatory deduction restriction for an income going untaxed due to tax Withholding lapse - the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced thus the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April 2005 thus the AO is directed to verify whether the payee has filed his return of income and paid taxes within the stipulated time Decided in favour of revenue.
Issues Involved:
1. Deletion of addition made under Section 40(a)(ia) of the Income Tax Act, 1961 due to non-compliance with Section 194J on Lab Testing Charges. 2. Deletion of addition made under Section 40(a)(ia) of the Income Tax Act, 1961 due to non-compliance with Section 194C on printing and stationery expenses. Detailed Analysis: Issue 1: Deletion of Addition under Section 40(a)(ia) for Non-Compliance with Section 194J on Lab Testing Charges Background: The Assessing Officer (A.O) disallowed Rs. 64,55,563/- under Section 40(a)(ia) of the Income Tax Act, 1961, observing that the assessee received professional and technical services from SRL Ranbaxy Ltd., necessitating TDS under Section 194J. CIT(A) Decision: The CIT(A) deleted the addition, reasoning that the appellant was an agent of SRL Ranbaxy Ltd. and not liable for deduction under Section 194J. The CIT(A) supported this decision with various judicial precedents. Appellate Tribunal's Analysis: The Tribunal considered the second proviso to Section 40(a)(ia) inserted by the Finance Act, 2012, which states that if the payee has filed their return of income and paid taxes, the assessee is deemed to have deducted and paid the tax on such sum. The Tribunal, following the Agra Bench's decision in Rajiv Kumar Aggarwal and the Delhi High Court's ruling in CIT Vs Rajinder Kumar, held that this proviso is declaratory and curative, having retrospective effect from 1.4.2005. The Tribunal directed the A.O to verify if the payee filed their return and paid taxes within the stipulated time. If so, no disallowance under Section 40(a)(ia) is warranted. Conclusion: The Tribunal remitted the case back to the A.O for verification, confirming that if the payee complied with tax obligations, the disallowance should not be made. Issue 2: Deletion of Addition under Section 40(a)(ia) for Non-Compliance with Section 194C on Printing and Stationery Expenses Background: The A.O disallowed Rs. 88,689/- under Section 40(a)(ia), noting that the assessee paid this amount to M/S WE ARE PRINTER for printing and stationery, which should be considered job work liable for TDS under Section 194C. CIT(A) Decision: The CIT(A) deleted the addition, stating that the payment was for the purchase of goods, not job work, and thus not liable for TDS under Section 194C. The CIT(A) relied on judicial rulings, including the Bang ITAT ruling in SPICE and the Delhi High Court in Dabur. Appellate Tribunal's Analysis: The Tribunal reiterated the second proviso to Section 40(a)(ia) and its retrospective application. The Tribunal directed the A.O to verify if the payee filed their return and paid taxes within the stipulated time. If so, the disallowance under Section 40(a)(ia) is not justified. Conclusion: The Tribunal remitted the case back to the A.O for verification, confirming that if the payee complied with tax obligations, the disallowance should not be made. Final Decision: The appeals filed by the Revenue were allowed for statistical purposes, with the cases remitted to the A.O for verification of compliance by the payees. The order was pronounced in the open Court on 25.7.2014.
|
